Honda in China: Vezel & XR-V small SUVs contribute to strong sales

Launching local production of Acura in 2016

2016/01/18

Summary

 German and U.S. OEMs' car sales have stalled in China as growth in the local automotive market slows. However, Japanese OEMs are enjoying strong sales. Honda Motor Co., Ltd.'s cumulative retail car sales in China for January-November 2015 increased by 33.0% year-on-year (y/y) to 869,000 units, marking a substantial increase. The popularity of the new Vezel and XR-V subcompact SUV models made a significant contribution, with sales for these two models together exceeding 200,000 units in the period January-November 2015.

 In 2016, Honda will launch a new Civic, as well as a new compact hatchback, and begin local manufacture of the Acura luxury compact sport utility vehicle (SUV) and Accord hybrid vehicle (HV). It appears the company has a goal in 2016 for sales of over 1 million units in China. 


 In preparation for future growth in sales, Guangqi Honda Automobile Co., Ltd., a joint venture (JV) between Guangzhou Automobile Group and Honda, began operations at its third plant (annual production capacity of 120,000 units) in September 2015. Currently the Fit subcompact car is being produced there, and manufacture of models like the Vezel will begin in the future. Because of this, Honda's annual production capacity in China has increased to 1.13 million units.

 At the same time, Dongfeng Honda Automobile Co., Ltd., a JV between Dongfeng Motor Corporation and Honda, has decided to delay construction on a third plant in Wuhan for the present. Dongfeng Honda's production volume for January-November 2015 increased by 12.3% y/y to 344,000 units. However, this volume is well within the JV's annual production capacity of 480,000 units. Dongfeng Honda is expected to start considering construction of a new plant after it improves capacity utilization at its existing plant. The JV is very likely to resume the project in 2017 and begin operations at the new plant in July 2018.



Honda's car sales in China: strong sales of Vezel and XR-V subcompact SUVs

 Honda's car sales in China substantially increased in 2015. The company's cumulative car sales for January-November 2015 grew by 33.0% y/y to 869,000 units. The increase in car sales was propelled by strong sales of the new Vezel subcompact SUV and its variant, the XR-V, which were launched at the end of 2014. Honda sold 102,000 units of the new Vezel and 98,000 units of the new XR-V during the period from January through November. Sales of the Fit, Odyssey, and Spirior, all of which underwent redesigns in 2014, also contributed to the increase in car sales throughout 2015. The company has taken a large step towards achieving its sales target of 950,000 units for the year.

 Due to a tax break offered by the Chinese government starting from October 2015 (see Note), sales of automobiles with engine displacements of up to 1.6 liters have increased since October. Examining the shipment volume by engine displacement data shows that since October, the shipment volume of the 1.5-liter Vezel surpassed that of the 1.8-liter Vezel.


Note: The Chinese government announced at the end of September 2015 that the purchase tax rate will be lowered from 10% to 5% for purchasers of passenger cars with engine displacements of 1.6 liters or less for the period from October 2015 to the end of 2016.

ホンダの中国小売台数 小型SUV Vezelの排気量別出荷台数

Honda's retail sales volume in China

January-November
2014 2015 YoY
Cumulative total 652,957 868,754 133.0%
Guangqi Honda Total 388,387 516,677 133.0%
Accord 99,807 111,447 111.7%
Odyssey 24,208 42,462 175.4%
City 41,974 38,463 91.6%
Fit 60,522 95,168 157.2%
Crosstour 22,447 15,483 69.0%
Everus S1 6,488 3,560 54.9%
CRIDER 129,339 107,564 83.2%
VEZEL 3,602 102,530 2846.5%
Dongfeng Honda Total 264,570 352,077 133.1%
CR-V 137,540 145,259 105.6%
CIVIC 46,249 32,064 69.3%
SPIRIOR 5,456 17,392 318.8%
CIIMO 11,281 2,977 26.4%
ELYSION 9,268 6,418 69.2%
JADE 54,776 48,848 89.2%
XR-V 98,304  - 
GREIZ 815  - 

(Note) Starting from April 2015, Honda's sales volume in China is based on a retail sales rather than factory shipments.
(Source: Honda press release)

 

 



Production capacity: third Guangzhou plant built, and third Wuhan plant construction postponed

 Honda has an assembled vehicle production capacity in China of 1.13 million units.  Guangqi Honda's yearly capacity ,including the capacity of its new third vehicle plant (began production in September 2015), is 600,000 units, while Dongfeng Honda's capacity is 480,000 units, and Honda's export-only plant has a production capacity of 50,000 units.

 Dongfeng Honda was scheduled to start construction on a third plant in Wuhan that would feature advanced automated facilities in 2015. However, the company had postponed the project for about two years.

Newly-constructed third plant in Guangzhou  In September 2015, Guangqi Honda began operations at a new third vehicle plant, and a new engine plant, which were built within the premises of the company's existing plant in Zengcheng District, Guangzhou City. The new vehicle and engine plants each have an annual production capacity of 120,000 units. Together with the capacity at the Huangpu Plant (240,000 units) and Zengcheng Plant (240,000 units), Guangqi Honda's overall annual vehicle production capacity has expanded to 600,000 units. The new vehicle plant produces the Honda Fit compact car, and will also produce the Vezel and City in the future.
 The new vehicle plant features the latest production technologies and minimized floor space, which offer substantial improvements to aspects such as, production efficiency, product quality, energy saving and eco-friendliness. In addition to the advanced automated facilities used in the production processes, the plant is equipped with a 17-megawatt solar power-generating system, which has the highest generation capacity among automakers in China.
Third Wuhan plant construction delayed  Dongfeng Honda postponed construction of a new third plant in Wuhan for the time being. While Honda did not make an announcement, according to documents released by the Hubei Provincial Development and Reform Commission, the Commission approved construction of a third Wuhan plant in December 2014.The documents go on to state that construction is to take place in the time from 2015 - 2020, with investment rising to CNY 5,224.96 million. The company planned to produce a class-B SUV, class-B sedan, the new Ciimo class-B hatchback, and electric vehicles. Annual production capacity at the plant was to expand to 240,000 vehicles.
 The project was postponed amid a downturn in the Chinese market because Dongfeng Honda has not achieved its 2015 sales target, which was set in 2013, of 500,000 units (353,000 units by November 2015). The company is expected to resume investigating the construction of a third plant after it improves capacity utilization (about 70% in 2014) at the existing second Wuhan plant. The company is very likely to resume the project in 2017 and begin operations at its new plant in July 2018.
Honda's annual passenger car production capacity in China  Honda has plants in Huangpu and Zengcheng, an export-only plant (Guangzhou City) in southern China, and the Wuhan plants in Hubei Province, central China. With the start of operations at the new vehicle plant in Guangzhou, Honda's annual passenger car production capacity in China will rise to 1.13 million units.

 

Production results by plant

Production volume at Guangqi Honda, Dongfeng Honda, and Honda Automobile (China)

Model Production volume (units) Production capacity
(tens of thousands of units/year)
Calendar year 2014 2015
2013 2014 Jan.-Nov. Jan.-Nov. 2015 Plan
Guangqi Honda Guangzhou Zengcheng Plant Accord 119,492 117,074 105,457 109,699 24 24
Odyssey 25,979 39,202 32,339 38,967
Crosstour 49,055 28,471 28,470 4,300
Guangzhou Huangpu Plant Everus S1 14,623 8,385 8,385 - 24 24
City 96,434 50,654 50,654 40,875
Crider 92,605 158,383 151,797 110,049
Vezel (from Oct. 2014) - 23,331 11,688 113,567
Fit (Production also began at third plant in Sept. 2015) 40,659 85,828 70,025 82,351
Third plant - - - 12
(from Sept. 2015)
24
(Possibility of expansion)
Vezel (plan) - - - -
City (plan) - - - -
Subtotal 438,847 511,328 458,815 499,808 60 72
Dongfeng Honda Wuhan first and second plants (Hubei Province) CR-V 191,735 170,040 166,403 134,002 48 48
Spirior 7,561 9,780 3,772 16,318
Elysion 10,560 8,280 7,920 5,545
Civic 69,215 56,820 56,061 25,104
XR-V - 535 5 108,722
Jade 31,052 65,272 61,206 47,135
Ciimo 15,719 11,454 11,034 1,327
Greiz (Production began in Oct. 2015) - - - 5,981
Third plant (construction postponed) SUVs, sedans, EVs - - - - - 24 (plan)
Subtotal 325,842 322,181 306,401 344,134 48 72
Honda Automobile (China) Export-only plant Jazz 24,000 4,830 4,830 - 5 5
Accord - 18,050 14,940 11,771
Subtotal 24,000 22,880 19,770 11,771
Total 788,689 856,389 784,986 855,713 113 149

 

Dongfeng Honda's integration project
* In August 2014, Dongfeng Honda Auto Parts Co., Ltd. held a foundation ceremony for its new integration project plant in the Daya Bay Economic & Technological Development Zone (area for emerging industries) of Guangdong Province. A total of CNY 4.5 billion has been invested in the new plant. The construction site has an area of 420,000 square meters, and the new plant will be able to produce engine parts and chassis components for 1.5 to 2.0 million vehicles annually.
May 2016: Mass production by third casting line
March 2017: Mass production by new centrifugal casting line
June 2017: Mass production by forging line
July 2018: Complete relocation of centrifugal casting lines to the Xinliao plant
* Among these, the Xinliao plant camshaft production line is the only one in China that has adopted a "hollow casting technique." The centrifugal casting line for producing cylinder liners incorporates advanced technology that only four companies in the world possess. Honda's expertise and patents have been adopted for the equipment of the main production line, and this is the first production line in China to integrate machine work with casting.

 




Product strategy: new compact cars and launch of Chinese-built Acura and Accord HV in 2016

 In 2014, Honda launched the Vezel and XR-V subcompact SUVs following the introduction of the third-generation Fit subcompact hatchback. In 2015, the company launched the Greiz compact sedan to strengthen its compact car lineup in China. The Vezel and XR-V in particular contributed to Honda's increased sales in China in 2015 as sales of these models together for January-November 2015 exceeded 200,000 units.

 In 2016, Honda will release the new Civic and a new compact hatchback, and begin local production of the Acura luxury compact SUV and Accord HV in China.

 

Vezel compact SUV Acura Concept SUV-X
Vezel compact SUV
Photo: at 2014 Beijing Auto Show
Acura Concept SUV-X
Photo: at Auto Shanghai 2013

 

Model Release Description
New Fit May 2014 The new Fit subcompact car is Guangqi Honda's fourth model. It is only available with a 1.5-liter four-cylinder engine. Guangqi Honda began importing the Fit HV from Japan in November 2012. Since going on sale, the Fit HV has not been redesigned. The Fit HV is powered by a 1.3-liter four-cylinder engine.
New Odyssey August 2014 The new third-generation Odyssey is mainly targeted to the upper middle-class. Prices for the new Odyssey range from CNY 229,800 to CNY 299,800.
The powertrain incorporates an "Earth Dreams Technology" 2.4-liter i-VTEC engine (Honda's next-generation power system), and CVT.
VEZEL October 2014 The new Vezel is a subcompact crossover SUV based on the Fit. It is built at Guangqi Honda's Huangpu Plant in Guangzhou City. The new Vezel went on sale in October 2014. It comes with a choice of 1.5-liter and 1.8-liter four-cylinder engines. No hybrid model is included in the lineup.
XR-V November 2014 The new XR-V subcompact crossover SUV is based on the Vezel and targeted at the Chinese market. The new XR-V is built at Dongfeng Honda's Wuhan Plant. It went on sale in November 2014. The new XR-V comes with a choice of 1.5-liter and 1.8-liter four-cylinder engines. It is priced between CNY 127,800 and CNY 162,800.  
New Spirior November 2014 Dongfeng Honda launched the new fully-redesigned Spirior. The Spirior is available in six variants, and priced from CNY 179,800 to CNY 267,800. This middle to high-end sedan was developed specifically for the Chinese market. The new Spirior has a 2,780 mm wheelbase, which is 75 mm longer than its predecessor, to offer spacious rear seating.
Interior comfort has been improved with Active Sound Control (ASC), to improve engine sound quality, and Active Noise Control (ANC), to reduce noise.
Greiz November 2015 Dongfeng Honda launched the new Greiz compact sedan in November 2015. This compact sedan uses the same platform as Guangqi Honda's current City. The new Greiz is targeted at young Chinese. It is priced between CNY 79,800 and CNY 119,800.  
New Crider December 2015 The new Crider is equipped with a new CVT, and Honda's Vehicle Stability Assist (VSA) and Lane Watch passenger side mirror camera come standard. It will go on sale on December 23, 2015.
Civic March 2016 The new Civic concept model was exhibited at the New York Auto Show in April 2015. The same model will be offered with a 1.0-liter or 1.5-liter turbocharged engine. Dongfeng Honda will begin production in March 2016.
Concept B 2016 This compact hatchback concept is under development to meet the tastes of the young Chinese. The Concept B made its debut at the Beijing Auto Show in April 2014. A model based on this concept car will be launched in 2016.
Acura subcompact SUV 2016 In April 2013, Honda exhibited the Acura Concept SUV-X at Auto Shanghai 2013 and announced that a production model of the concept would be built and marketed in China in three years. This will be the first Chinese-built model under the Acura brand.
Accord HV Second half of 2016 Along with the introduction of Honda's i-MMD hybrid power system in 2016, Guangqi Honda is scheduled to launch an Accord HV equipped with it in the second half of 2016.

Acura brand

Sales target progress * Since 2013 Honda has continuously introduced models with small-displacement engines, which are in high demand in China, in order to strengthen the car lineup available locally.
* 2013: Launched the flagship RLX.
* In 2014, Honda set a sales target of over 8,000 Acura cars. However, it only sold 5,040 units.
* Honda's cumulative sales of Acura cars for January-October 2015 was 4,000 units. The company is not likely to achieve its full-year sales target of 10,000 units.
 Honda will launch the all-new NSX, equipped with Honda's Sport Hybrid SH-AWD, a high-performance and high-output hybrid system. Production of the model was scheduled to begin in the U.S. in the fall of 2015. However, the production has been postponed until spring 2016. In China, the application process to import and sell the model in 2016 is in progress.
Local production progress Honda is moving to start local production of Acura models at Guangqi Honda from 2016. Honda announced at Auto Shanghai 2015 held in April 2015 that it will begin Chinese production of Acura models in the middle of 2016. The first model will be based on the Concept SUV-X, which was exhibited at Auto Shanghai 2013 in April 2013. It is expected to come with a choice of two powertrains, a turbo engine or twin-motor hybrid system.

 

Sales volume of Acura cars in China (Import: Jan.-Sep. 2015)
Acura model Units
RDX 2,205
MDX 1,377
ILX 211
RLX 207
Total 4,000
Acuraモデルの販売台数

 

Low-priced HV production

* Honda plans to produce a low-priced HV jointly with Dongfeng Motor Corporation and Guangzhou Automobile Group (as of December 2013). The new HV is scheduled to be launched in 2016 (progress unknown), with the sales price targeted at below CNY 90,000. The new HV will be based on the Honda Fit subcompact car (the Fit HV is priced from CNY 180,000), and the world's lowest priced HV in its class.
* In the future (specific timing unknown), Honda will further reduce costs and lower the price of the Chinese-built HV to CNY 80,000.
* The annual sales volume target in China will initially be about 1,000 units, and Honda will expand that to between 20,000 and 30,000 units in the future.

 

 



Honda's mid-term China business plan status: failure to achieve sales targets

Progress in implementing Dongfeng Honda's plan "Challenge 1+"

 In July 2013, Dongfeng Honda announced its mid-term business plan with the key phrase "Challenge 1+." Two years have elapsed since then, and the progress of the plan is as follows:

Sales targets  The sales target for 2015 was set at 500,000 units. The company's long sales target is to achieve annual sales of 1 million units within ten years (by 2023).
=> As of November 2015, Dongfeng Honda sold 352,000 vehicles in 2015. The company is not likely to achieve its sales target.
Construction of new plants  The company proceeded with the second-phase of work on its second Wuhan passenger car plant, increasing annual production capacity from 120,000 units to 240,000 units, and raising the company's annual production capacity, including that at the first plant, to 480,000 units. In October 2015, Dongfeng Honda decided to postpone constructing a third passenger car plant for the time being.
Production model lineup expansion  The company sought to increase its production lineup, mainly of compact cars, and introduce a total of six new models including full redesigns by 2015.
=> As shown in the section outlining new models released in China between 2014 and 2016, the company introduced a total of six models, including the new Fit and Greiz.
Adoption of FUNTEC technology  The company aimed to accelerate the introduction of new models that utilize Honda's FUNTEC technology to provide stat-of-the-art environmental friendliness, safety, and comfort.
=> The Crider, launched in 2013, was the first model that adopted the technology, and the Jade, ninth-generation Accord, Vezel, new Fit, and Spirior were equipped with it as well. At the 2014 Beijing Auto Show, the Concept B five-door hatchback, which embodies Honda China's FUNTEC slogan, made its international debut. A production model of the concept is under development. Honda plans to launch the production model in 2016.
Introduction of Earth Dreams Technology  Honda aimed to successively introduce its advanced powertrain system technology "Earth Dreams Technology" into current production models.
=> The technology was introduced in the new Fit, which was launched in May 2014, as well as most of the company's production models.
Increasing the number of dealerships  The company sought to increase the number of dealerships to 450 (there were more than 360 dealerships as of September 2014).
=> Dongfeng Honda has 400 dealerships as of October 2015. It will increase the number of dealerships to 410 by the end of 2015.

 

Guangqi Honda

Sales target progress 2014: over 500,000 units
2015: 700,000 units
2020: 1 million units
=> As of November 2015, Guangqi Honda sold 516,000 vehicles (retail sales), so the company is not likely to achieve its sales target. Guangqi Honda's sales target for 2016 was revised to over 600,000 units.
Commercial model plan progress  The company aimed to produce HVs in China by 2016.
=> The Accord HV was displayed at the China Guangzhou International Automobile Exhibition in 2015. The company will begin sales of a Chinese-built model of the Accord HV in the second half of 2016.

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